The Federal Board of Revenue (FBR) has issued a detailed recovery procedure of sales tax liabilities of the bankrupted registered companies through liquidators appointed by ourts, under the General Sales Tax Bill 2010.
According to the comparison of the 'Federal Value-Added Tax (VAT) Bill 2010' and 'GST Bill 2010', presented to the Senate standing committee on finance on Monday, section 66 of the 'GST Bill 2010' deals with the estate of bankruptcy. If any registered person is declared bankrupt, his outstanding tax liability shall pass on to the estate in bankruptcy, whether or not it continues to operate as a business.
Under the new provision, the outstanding sales tax liabilities of the bankrupted registered persons would be passed on to the estate in bankruptcy under the General Sales Tax Bill 2010.
Explaining the new provision, tax experts said that if any person is declared as bankrupt, his outstanding tax liability shall be paid by the liquidator out of the proceeds of the assets owed by him. The estate usually covers assets, property or wealth etc, and liquidator is appointed by court to deal with the bankrupted units. In case any person is declared as bankrupt, his outstanding tax liability is being paid by the liquidator out of the proceeds of the assets owed by the bankrupted person, he added. The section 67 of the GST Bill 2010 deals with recovery of sales tax through a liquidator. However, the corresponding section 66 of the Federal VAT Bill 2010 deals with the tax liability in case of private companies or business. Where any private business or company is wound up and any tax chargeable on the company or business, whether before in the course or after its liquidation, in respect of any tax period cannot be recovered from the company or business, every person who was the owner of or partner in or director of the company or business shall jointly and severally be liable for the payment of such tax.
The section 68 of the GST Bill 2010 covers the tax liability in case of a private company or business. The provision says that where any private company or business is wound up and any tax chargeable on the company or business, whether before or in the course or after its liquidation, in respect of any tax period or periods cannot be recovered from the company or business, every person who was the owner of, or partner in or director of the company or business during the relevant period or periods shall, jointly and severally, be liable for the payment of such tax.
The Third Schedule of the GST Bill 2010 has proposed penalty of Rs 5000 for failure to notify changes of address or increase in business capacity of material nature in the particulars of registration. The same provision was available under the Federal VAT Bill 2010. However, the section 33 of the Sales Tax Act covers offences and penalties. The Sales Tax Act specifies that any person who fails to notify the changes of material nature in the particulars of registration of taxable activity, such person shall pay a penalty of Rs 5,000. A new provision has been introduced in the Third Schedule of the GST Bill 2010 to impose penalty of Rs 5000 for failure to notify changes of address in the particulars of the sales tax registration.
The comparison of the Federal Value-Added Tax (VAT) Bill 2010 and GST Bill 2010 also shows that the registered person who makes a taxable supply to an unregistered person shall issue a sales receipt for the supply under the GST Bill. According to section 52 of the GST Bill 2010, a sales receipt must contain the information prescribed by the Board, including but not limited to date on which it is issued; name and registration number of the supplier; a description of the goods or services supplied; the total amount payable for the supply; an indication that tax is included in the amount paid and the name and computerised national identity card number (CNIC) in case of individuals and national tax number (NTN) in case of other buyers. In case of the Federal VAT Act, the section 52 is related to the documentation issued by or to agents.
The section 71 of the GST Bill 2010 has introduced the concept of the forensic audit of the registered person. This enforcement provision of the forensic audit is not available under the Sales Tax Act. However, section 71 of the Federal VAT Bill 2010 says that no multiple departmental audit would be conducted in normal circumstances.
Under section 71 of the GST Bill 2010, the officer of Inland Revenue, authorised in this behalf by the Board, may conduct audit, including forensic audit, of any registered person on giving advance notice, provided that such notice may be dispensed with by the officer of Inland Revenue where tax fraud is suspected. Each of the audit observations of the officer of Inland Revenue shall be conveyed to the concerned registered person and finalised on examining the viewpoint of such registered person, to be furnished within such period as may be specified by the said officer. If no viewpoint is received from a registered person during the specified period, any contravention specified in the audit observation shall be adjudicated. The show-cause notice shall stand abated where a person has before the finalisation of adjudication, deposited the unpaid amount of tax along with default surcharge and penalty due under the Act.
The comparison of Sales Tax Act and GST Bill 2010 also shows that the government would charge 15 percent GST on the supply of consumer items, sold in packing, on which presently sales tax has been charged on the basis of printed retail price under the GST bill 2010. There is no special schedule in the GST Bill to deal with the consumer items sold in retail packing. Under the GST Bill, 15 percent GST would be charged on the supply of fruit juices and vegetable juices, ice cream, aerated waters or beverages, syrups and squashes, cigarettes, toilet soap, detergents, shampoo, toothpaste, shaving cream, perfumery and cosmetics, tea, powder drinks, milky drinks, toilet paper and tissue paper, spices sold in retail packing bearing brand names and trade marks and shoe polish and shoe cream. The GST Bill 2010 has abolished Third Schedule of the Sales Tax Act, 1990, which would bring items of the Third Schedule under the normal tax regime.